My mother is at a ripe old age, and already a great grandmother. Older folks derive an immense sense of pride and joy in seeing the expansion of their family bloodline - children, grandchildren, and great grandchildren even.
For years since I started work, I've been making it a point to contribute 10% of my income to her. She hadn't found much of a need to spend. So she had been systematically saving the money into a bank savings account.
Recently, she showed me her passbook. Yes, she's still using a passbook! More than 20 years on, the savings had snowballed to well over $200,000. That's quite a tidy sum indeed.
She has some interesting intentions over how this would be used.
Firstly, should she run into any medical problem, this sum would be used to pay for medical contingencies. To ensure that someone else would have access to it, the savings account book was hence set up as a Joint Savings "or" account with me.
Secondly, if she passes on, her intention is that I should inherit the sum. As far as she is concerned, the money was from me and it's only fair that it should end up with me eventually (if any is left).
Personally, my thoughts were that the money I gave her was for her to use and to spend as she saw fit. I have no expectations for any sort of inheritance.
My mother is a most frugal person and remains very much a saver rather than a spender. In part, her sense of cost is very much anchored to her childhood. Hence, she really has difficulty contemplating paying for expensive meals, or even the taxi fare.
Several points I get from this:
- Frugality and savings can generate a tidy sum by retirement.
- Set aside a sum for medical emergencies; this risk increases with age.
- Have someone you trust to have access to the cash; not going to help you if you're in serious trouble and someone can't get access to it for you.
The only downside is that keeping the sum in a savings account hasn't exactly been ideal with the negligible interest rates that we've been experiencing. But it's not unreasonable either given that this hoard has to be kept fluid, and in low-risk form.
Seems like a reasonable plan? I thought it was quite prudent.
The side note that I had was over when my mother should have communicated this intention? It's fortunate that she is still in fairly good mental and physical health despite her age. Although, I can observe in recent years that she can get pretty confused. I think it is best to establish such an arrangement much earlier.
Fruits for thoughts.
Meanwhile, HELLO 2015!
Investment through the ages, from cradle to grave.
30 December 2014
SingPost - From Postal Service to eCommerce
Not too long ago, SingPost was viewed as an excellent dividend stock on SGX. Being the monopoly in postal services, it was viewed as a bedrock income stock. However, with the advent of the Internet and pervasive mobile device access, one wonders what dinosaur still need to send letters around? Numbers have been clearly dwindling in this regard.
So it is with some risk, and I feel with much strategic foresight, that SingPost brought in a new management team and started embarking on exploiting their strength, rapidly moving into eCommerce logistics by acquiring several companies. At the same time, exploiting technology to enhance and improve efficiency in their traditional postal services.
If it was once a dividend-value stock, it is now more like a growth company. Its future could yet be most exciting.
Interestingly, I read that the US Postal Services (USPS) has also started thinking along this line, recognising that its existing reach could well put it in a position to challenge UPS and FedEx. USPS has been suffering from losses and cutbacks in recent years. They're a bit slow aren't there?
Being small can sometimes a be a strength - by being nimble, complemented by foresight and the courage to take action to reshape its future. Being large has benefits in terms of critical mass, and therefore enjoying economy of scale. But a large machinery moves too slowly sometimes, grounded by its inertia.
See previous:
SingPost Joins Hand with Alibaba and the 40 Thieves
So it is with some risk, and I feel with much strategic foresight, that SingPost brought in a new management team and started embarking on exploiting their strength, rapidly moving into eCommerce logistics by acquiring several companies. At the same time, exploiting technology to enhance and improve efficiency in their traditional postal services.
If it was once a dividend-value stock, it is now more like a growth company. Its future could yet be most exciting.
Interestingly, I read that the US Postal Services (USPS) has also started thinking along this line, recognising that its existing reach could well put it in a position to challenge UPS and FedEx. USPS has been suffering from losses and cutbacks in recent years. They're a bit slow aren't there?
Being small can sometimes a be a strength - by being nimble, complemented by foresight and the courage to take action to reshape its future. Being large has benefits in terms of critical mass, and therefore enjoying economy of scale. But a large machinery moves too slowly sometimes, grounded by its inertia.
See previous:
SingPost Joins Hand with Alibaba and the 40 Thieves
29 December 2014
Boustead - a Hive Demerging
The headline of an article in The Edge screamed "Boustead Proposes a Break-up"! Sounded disastrous. Actually it is not. Essentially, Boustead is mooting to separate its property business into a REIT and to distribute the shares of this new company to its existing shareholders via a distribution in specie. It's like receiving dividends in the form of additional shares, except that these are for a separate company that is also listed on the stock exchange.
Sounds interesting rather than disastrous. However, some shareholders are not in favour as Boustead could lose some of its inherent diversity to withstand ups and downs with its respective business sectors if it hives off the property business.
Regardless, Boustead has maintained a pretty steady performance over the years. It is one of the stock in my team selection: My World Cup Team (of Dividend Value Stocks). I remain vested in this company.
Sounds interesting rather than disastrous. However, some shareholders are not in favour as Boustead could lose some of its inherent diversity to withstand ups and downs with its respective business sectors if it hives off the property business.
Regardless, Boustead has maintained a pretty steady performance over the years. It is one of the stock in my team selection: My World Cup Team (of Dividend Value Stocks). I remain vested in this company.
27 December 2014
Buyout interest in euNetworks (a GKGoh associate)
There is quite a bit of coverage in this week's The Edge on GKGoh, especially over the possibility of a buy out of euNetworks, an associate company.
Strange that there is so much interest in euNetworks considering that it has been loss making thus far. The potential probably lies in its role as an incumbent of fibre networks in major European cities. It is likely difficult for any new entrant to be able to lay new networks in such mature cities.
Meanwhile, GKGoh continues to trade at a discount to its book value (P/B is 0.72). So that remains attractive to me personally. I always find it strange when a company is valued below its book value when there is no apparent reason. Unrecognised value, or simply the norm for an investment holding company to suffer a discount?
I particularly like its holding of Boardroom, another stock on the SGX, and its Australian aged care holding. Boardroom has shown steady business and dividend payout. The Australian holding will likely provide a regular income stream as well.
I like that the founders/insiders have been buying their own stocks regularly in recent months.
A key risk lies in that the original founder is already 70 years of age and is looking at his succession. He has two sons in the company. Will the next generation be able to run the investment holding company as prudently and successfully?
See previous assessment:
G K Goh - who is this guy?
Strange that there is so much interest in euNetworks considering that it has been loss making thus far. The potential probably lies in its role as an incumbent of fibre networks in major European cities. It is likely difficult for any new entrant to be able to lay new networks in such mature cities.
Meanwhile, GKGoh continues to trade at a discount to its book value (P/B is 0.72). So that remains attractive to me personally. I always find it strange when a company is valued below its book value when there is no apparent reason. Unrecognised value, or simply the norm for an investment holding company to suffer a discount?
I particularly like its holding of Boardroom, another stock on the SGX, and its Australian aged care holding. Boardroom has shown steady business and dividend payout. The Australian holding will likely provide a regular income stream as well.
I like that the founders/insiders have been buying their own stocks regularly in recent months.
A key risk lies in that the original founder is already 70 years of age and is looking at his succession. He has two sons in the company. Will the next generation be able to run the investment holding company as prudently and successfully?
See previous assessment:
G K Goh - who is this guy?
25 December 2014
X'mas 2014
Its X'mas 2014. I've been lazy with blogging of late. In part, this was because I've been travelling on holidays. And watching with some excitement the ups and downs of the stock markets.
Bob the Builder
In recent weeks, I've visited KL and Sydney and couldn't help noticing the extent of construction work going on in both cities. There can be all kinds of bad news (e.g. impact of oil on Malaysia, and mining for Australia), but their economies appear to do fine. Economic activities continue to thrive. Life goes on.
As a trivia ... I didn't realise the significance of the location of the Lindt Cafe at Martin Place, Sydney. Guess what's just across from the cafe?
Slippery Oil
The rapid reversal of the price of oil I think has created opportunities. It's time to start watching the big US oil companies. After all, we need oil for plenty of things don't we? It may just take awhile to see results. I read an article a few days ago which highlighted news from the last major oil crisis. The parallels were indeed stark. So much fear. Opportunity! ExxonMobil or Chevron anyone?
All that Gloom May Not Be Doom
Look at what happened to China recently. It was all doom and gloom a few months ago. Its stock market took a nosedive. It was bleeding nose affair. But in the last few weeks, it appears to have risen rapidly. There is so much disjointedness between the stock market and economic data sometimes.
Global Business Diversification
It's great to have companies that are global in nature and does business across the global. Consider Johnson & Johnson, Proctor & Gamble, McDonalds and such. In contrast, a company like Empire Food which does most of its business in Russia suffers horribly when hit with a shock like currency devaluation. Roubles rubbles, bubbles jumble, absolutely trouble.
The End of 365 Days Since X'mas
It's X'mas today. That means the New Year is just round the corner. Time to take stock of my portfolio's growth over the year. Looking forward to the crediting of interest to my CPF as well.
Merry X'mas & Happy New Year!
p/s: Actually X'mas is coming again. It's just another 364 days away!
Bob the Builder
In recent weeks, I've visited KL and Sydney and couldn't help noticing the extent of construction work going on in both cities. There can be all kinds of bad news (e.g. impact of oil on Malaysia, and mining for Australia), but their economies appear to do fine. Economic activities continue to thrive. Life goes on.
As a trivia ... I didn't realise the significance of the location of the Lindt Cafe at Martin Place, Sydney. Guess what's just across from the cafe?
Slippery Oil
The rapid reversal of the price of oil I think has created opportunities. It's time to start watching the big US oil companies. After all, we need oil for plenty of things don't we? It may just take awhile to see results. I read an article a few days ago which highlighted news from the last major oil crisis. The parallels were indeed stark. So much fear. Opportunity! ExxonMobil or Chevron anyone?
All that Gloom May Not Be Doom
Look at what happened to China recently. It was all doom and gloom a few months ago. Its stock market took a nosedive. It was bleeding nose affair. But in the last few weeks, it appears to have risen rapidly. There is so much disjointedness between the stock market and economic data sometimes.
Global Business Diversification
It's great to have companies that are global in nature and does business across the global. Consider Johnson & Johnson, Proctor & Gamble, McDonalds and such. In contrast, a company like Empire Food which does most of its business in Russia suffers horribly when hit with a shock like currency devaluation. Roubles rubbles, bubbles jumble, absolutely trouble.
The End of 365 Days Since X'mas
It's X'mas today. That means the New Year is just round the corner. Time to take stock of my portfolio's growth over the year. Looking forward to the crediting of interest to my CPF as well.
Merry X'mas & Happy New Year!
p/s: Actually X'mas is coming again. It's just another 364 days away!
04 December 2014
3 Events in Recent Weeks
Thoughts on 3 events over these past weeks:
1. SGX Crashed. Traders must have moaned and groaned until it was recovered. Pity those software and systems engineers involved in the fiasco. Must have stressed until 'lao sai'. Who benefits? Maybe nobody. Who suffers? Those who trade. But being a value investor, it was a non-event. Fascinating, and marginally amused.
2. Oil Slips. It's been a steep and slippery slope downhill. Beginning to look like Gold. Who benefits? Those who use a lot of oil in the first place. So transportation companies ought to benefit. Yeah for SIA! Who suffers? Those who make money selling oil. Oh no for Chevron. How will it affect Union Pacific? Mixed feelings, given that it is a transportation company but its current business loads seemed to be from moving fuels around. Not doing anything, but watching with interest.
3. The Glass Splits. Not that it's broke, but the shares of The Hour Glass went through a stock split of 3 shares for every 1 share. Effectively, that meant the price also dropped to 1/3, all else unchanged. Interestingly though, there was quite a bit of selling thereafter. Probably some people didn't know what had happened and thought it had crashed. Sounds like an opportunity, so I bought more.
1. SGX Crashed. Traders must have moaned and groaned until it was recovered. Pity those software and systems engineers involved in the fiasco. Must have stressed until 'lao sai'. Who benefits? Maybe nobody. Who suffers? Those who trade. But being a value investor, it was a non-event. Fascinating, and marginally amused.
2. Oil Slips. It's been a steep and slippery slope downhill. Beginning to look like Gold. Who benefits? Those who use a lot of oil in the first place. So transportation companies ought to benefit. Yeah for SIA! Who suffers? Those who make money selling oil. Oh no for Chevron. How will it affect Union Pacific? Mixed feelings, given that it is a transportation company but its current business loads seemed to be from moving fuels around. Not doing anything, but watching with interest.
3. The Glass Splits. Not that it's broke, but the shares of The Hour Glass went through a stock split of 3 shares for every 1 share. Effectively, that meant the price also dropped to 1/3, all else unchanged. Interestingly though, there was quite a bit of selling thereafter. Probably some people didn't know what had happened and thought it had crashed. Sounds like an opportunity, so I bought more.
11 November 2014
State of the Economy - 2014
Looking back, the year hasn't been as bad as 2008 nor 2011, but it sure comes close. MERS virus was a global scare in the Middle-East and gave me visions of World War Z (the movie). It was made worse with the uncontrolled outbreak of Ebola virus in Africa.
Crimea was annexed and the Great Russian Bear came a calling. West European nations desperately attempted in their disorganised manner to shore up their East European neighbours as the new democracies faced the threat from the the Rise of the Big Bad Bear. Ukraine is starting to look like a Yugoslavia.
The US pulled out of the quagmire of Iraq and Afghanistan, only to see the onslaught of a new threat in the form of ISIS. Strange bedfellows unfold in this complex environment.
All these while, the US has been espousing the rhetoric of "Pivot to the Pacific" to confront China and the many issues in the Pacific region. The Middle Kingdom continues to grow economically and militarily. The future of a new era of East vs West Part II is in the works.
Meantime, a Malaysian airline flew all over the Pacific and Indian Ocean, only to go missing and likely crashed into the depth of the ocean, in an ocean far far away, and in an opposite direction from where it was originally headed, co-incidentally, to China. Someone else shot down another over Ukraine. Not a good year for airlines, especially if you are MAS. SIA is not having a fun time with Tiger Air either.
Fires and tornadoes raged in US. Fear of icebergs melting raised fear of the impending disaster of the impending Great Flood. Water scarcity continues to be pitched as a scarce resource that bears further investments into, more so than the glitzy allure of Gold.
How do all these affect my stock portfolio? Not much actually. In the end, the shares' performance depend on investor sentiments, underpinned by the longer term profitability and potentials of the companies. Well managed companies with products or services that can sell and sell at good margins are what makes for growth.
Related:
A Sea of Red - Oct 2014
Pattern of Behavior - A Review for 2013
Recollections of my companies (2011)
Crimea was annexed and the Great Russian Bear came a calling. West European nations desperately attempted in their disorganised manner to shore up their East European neighbours as the new democracies faced the threat from the the Rise of the Big Bad Bear. Ukraine is starting to look like a Yugoslavia.
The US pulled out of the quagmire of Iraq and Afghanistan, only to see the onslaught of a new threat in the form of ISIS. Strange bedfellows unfold in this complex environment.
All these while, the US has been espousing the rhetoric of "Pivot to the Pacific" to confront China and the many issues in the Pacific region. The Middle Kingdom continues to grow economically and militarily. The future of a new era of East vs West Part II is in the works.
Meantime, a Malaysian airline flew all over the Pacific and Indian Ocean, only to go missing and likely crashed into the depth of the ocean, in an ocean far far away, and in an opposite direction from where it was originally headed, co-incidentally, to China. Someone else shot down another over Ukraine. Not a good year for airlines, especially if you are MAS. SIA is not having a fun time with Tiger Air either.
How do all these affect my stock portfolio? Not much actually. In the end, the shares' performance depend on investor sentiments, underpinned by the longer term profitability and potentials of the companies. Well managed companies with products or services that can sell and sell at good margins are what makes for growth.
Related:
A Sea of Red - Oct 2014
Pattern of Behavior - A Review for 2013
Recollections of my companies (2011)
21 October 2014
A Sea of Red - Oct 2014
Judging from all the news that abound, it would seem like the market has met Dooms Day. World news would seem to back up the argument:
The talking heads will probably be either (a) spreading the gloom and doom story, or (b) "Opportunities will again present itself in this time of fear. Time to find good stock to invest in. But patience may be needed."
- Ebola virus
- ISIS in middle-east
- Ukraine crisis and a resurgent Russia
- Stagnation of Japan
- Protests in Hong Kong
- Weakening China market that continues to flex its military muscle in the Asia-Pacific region
- Drop in oil prices
- Softening commodities negatively affecting Australia
- Possible accounting issues at Tesco impacting Berkshire Hathaway
- US companies running away from its home soil to avoid tax
The list goes on and on. Yet, has the market corrected beyond 10%? Apparently not, or maybe just not yet.
Basically, they don't know any better. After all, why would they? They are not clairvoyant and don't have any all-seeing eye either. But where fear and doom abound, there are always opportunities.
Companies are still selling their products and continue to make money. I will certainly still need the toothpaste, shampoo, medicine, food, use my mobile, surf the net, watch my cable TV, shop at the malls, etc. Life goes on.
13 October 2014
A REIT Time, a Dividend Future - ARA
The recent MAS consultation on changes to REIT management has spurred various reactions on its future impact. Most seem to suggest that it would be positive for all parties concerned.
One area of concern has been the impact on companies that manage REITs, especially ARA. Its management has expressed that while it may result in lower earnings, it could lead to the expansion of its asset under management and would balance off in the long run.
| (05/11/2013) | 1.940 |
| 52 Week Low (SGD) (04/02/2014) | 1.635 |
| 52 Week Return (%) | -2.010 |
| Average Volume ('mil) | 0.2852 |
| Beta | 0.85 |
| Financial strength | |
|---|---|
| Current Ratio | 1.84 |
| Quick Ratio | - |
| Long Term Debt to Equity (%) | 0.05 |
| Total Debt to Equity (%) | 10.98 |
| Interest Coverage Ratio (TTM) | - |
| Free Cash Flow to Firm (TTM) (SGD 'mln) | 68.32 |
| Margin | |
|---|---|
| Gross Margin (TTM) (%) | - |
| Operating Profit Margin (TTM) (%) | 61.88 |
| Net Profit Margin (TTM) (%) | 55.66 |
| Dividend § | |
|---|---|
| Annual Dividend per share (SGD) | 0.0500 |
| Dividend Yield (TTM) (%) | 2.93 |
| Dividend Yield (Annual) (%) | 2.93 |
| Payout Ratio (TTM) (%) | 28.24 |
| 3-Year Growth Rate (%) | 4.64 |
| Valuation | |
|---|---|
| Historical P/E Ratio | 19.41 |
| P/E Ratio (TTM) | 17.83 |
| P/BV (latest interim) | 4.93 |
| BVPS (latest interim) (SGD) | 0.3462 |
| EPS TTM (SGD) | 0.0956 |
[Source: POEMS, dated 13 Oct 2014]
Its financials appear to be in fairly good shape thus far. Question is, will it be able to absorb the effects of this upcoming change?
Its Distribution Per Share (DPS) grew steadily from 0.0397 to 0.05 (2.93% yield) between FY09 to FY13. A steady dividend payout history is an encouraging sign. Yet, its payout has kept below 30% despite this. Over the same period, its Earnings Per Share (EPS) has grown from 0.0572 to 0.0879. That means that its DPS has stayed below its EPS. I view these as positive and prudent.
Suppose its earnings were to collapse down to its FY09 level of 0.0572, would it still be able to sustain the dividend payout at 0.05 (FY13)? It would likely face increased pressure to reduce its dividends, or face an expansion of its payout ratio. But this is just one scenario.
I have a small holding in this company and will keep things unchanged for now. Happy to continue to collect its dividends meanwhile.
09 October 2014
AirBnB - Sharing a Home for Rental Income
The Internet of Things has enabled in recent times this trend of "sharing". In reality, it is actually not a recent thing as the trend had started many years ago, but perhaps becoming more viable as a business concern in recent times. Transportation (Uber), accommodation (AirBnB), you name it. The Internet makes it easy for such businesses to thrive.
Interestingly, those who advertise Singapore properties on AirBnB are likely in violation of the law as short term rentals for anything less than 6 months is apparently not allowed. That hasn't stopped many from trying though. They are really risking it. Considering that properties are expensive like heck in Singapore, that's putting a lot at risk. You could lose your house! It probably doesn't take a lot for your neighbours to get upset with you and make a report.
I suppose the government would be reviewing its policy on this in due course. Given Prime Minister's speech at the National Day Rally on monetising the home for retirement (Post National Day Rally 2014 - Education, CPF and Infrastructure), perhaps such short term rentals could provide an additional option as a source of income for retirees?
Understandably, these have to be balanced against having tons of strangers thronging around our residences, creating concerns of insecurity. It is perhaps less of an issue if the owner actually stays in the home. But another thing altogether when fully rented out.
When renting homes overseas, though not from AirBnB, I've come across rental homes residing in nice, quiet neighbourhoods. I never once met the owners. I was given the numeric lock numbers over e-mail to gain access to the lock at the entrance of the house. The lock box provided the keys to the house. And on leaving, I only had to lock up the place and lock up the keys. Pretty much an "unmanned" experience. This happened at both Phillip Island and Fremantle in Australia. Must say that both were most positive experiences for my family. The houses were fully functional and well stocked.
Related:
Post National Day Rally 2014 - Education, CPF and Infrastructure
Cashflow - A Tale of Stable Income
Property - An Asset, Liability or Cashflow?
Interestingly, those who advertise Singapore properties on AirBnB are likely in violation of the law as short term rentals for anything less than 6 months is apparently not allowed. That hasn't stopped many from trying though. They are really risking it. Considering that properties are expensive like heck in Singapore, that's putting a lot at risk. You could lose your house! It probably doesn't take a lot for your neighbours to get upset with you and make a report.
I suppose the government would be reviewing its policy on this in due course. Given Prime Minister's speech at the National Day Rally on monetising the home for retirement (Post National Day Rally 2014 - Education, CPF and Infrastructure), perhaps such short term rentals could provide an additional option as a source of income for retirees?
Understandably, these have to be balanced against having tons of strangers thronging around our residences, creating concerns of insecurity. It is perhaps less of an issue if the owner actually stays in the home. But another thing altogether when fully rented out.
When renting homes overseas, though not from AirBnB, I've come across rental homes residing in nice, quiet neighbourhoods. I never once met the owners. I was given the numeric lock numbers over e-mail to gain access to the lock at the entrance of the house. The lock box provided the keys to the house. And on leaving, I only had to lock up the place and lock up the keys. Pretty much an "unmanned" experience. This happened at both Phillip Island and Fremantle in Australia. Must say that both were most positive experiences for my family. The houses were fully functional and well stocked.
Related:
Post National Day Rally 2014 - Education, CPF and Infrastructure
Cashflow - A Tale of Stable Income
Property - An Asset, Liability or Cashflow?
08 October 2014
Who Digs Me? From Russia with Love
Was browsing through the data on the audience that hit my blogs and found it fascinating. Based on the total data from "all time", expectedly, Singapore is the top origin. And as would be reasonably expected, the US and UK would feature among the top few given that my posts are in English after all.
In some months, page views from UK, France and Germany actually outstrips Singapore! I wonder what's the cause of the attraction?
But I thought it was strange to see among the Top 10 coming from Russia, Latvia, Poland and Ukraine as well. Either there are many web hosting services actually located in those countries, or they are some kind of bots that are hitting on my blogs for some purposes that I have yet to comprehend. I'm sure the topical musings in my posts couldn't be of such tremendous interest to attract readers from these countries. Or do they?
I checked out some of the Russian origin URLs (*.ru) indicated in my Blogspot data. They seem to be selling various kinds of paraphernalia - e.g. knife shaped credit cards, dog repellant devices and sleeping masks with a "memory". Fascinating products! But I still couldn't fathom why these were sources of referrals to my blog. I certainly didn't see any links. Wonder why?
It's such a fascinating world we live in!
In some months, page views from UK, France and Germany actually outstrips Singapore! I wonder what's the cause of the attraction?
But I thought it was strange to see among the Top 10 coming from Russia, Latvia, Poland and Ukraine as well. Either there are many web hosting services actually located in those countries, or they are some kind of bots that are hitting on my blogs for some purposes that I have yet to comprehend. I'm sure the topical musings in my posts couldn't be of such tremendous interest to attract readers from these countries. Or do they?
I checked out some of the Russian origin URLs (*.ru) indicated in my Blogspot data. They seem to be selling various kinds of paraphernalia - e.g. knife shaped credit cards, dog repellant devices and sleeping masks with a "memory". Fascinating products! But I still couldn't fathom why these were sources of referrals to my blog. I certainly didn't see any links. Wonder why?
It's such a fascinating world we live in!
07 October 2014
Rental or Ownership - Which Makes Sense for a Home?
Since eons, it seemed to be a given that we should strive towards owning that roof over our head that we call our home. It was imbued in our psych that this is a necessary step to ensure our well being, carrying us into our retirement. With such an asset firmly in our hands, we then need only to worry about other expenses for a healthy living and retirement.
It has also often been explained that between renting versus owning a property, the earlier leaves one with nothing, while the later produces an asset at the end of the day.
I've been thinking though, do the maths really work out right today? I own my condo, apparently valued at about $1m today. Or maybe a bit less, given the softening property market. What would it cost to rent?
Suppose I were 65 years today (or should I be thinking 67 now!?), and assuming I have 30 years to go, paying a monthly rental instead of $3,000 a month - that works out to be $1.08m in total, without accounting for the time value of money. Seems logical to own my property rather than rent, since I would have paid the equivalent sum over time?
But let's consider an alternate future. Suppose I monetise the $1m by selling off my property and then investing that $1m, generating a 4% real return on the investment, giving me $40,000 a year. That would actually be more than the $36,000 a year in rental.
Does this look a real proposition to ponder? Will the rental rate hold, or will it increase over time? With age and time, do the equations change?
Related:
Post National Day Rally 2014 - Education, CPF and Infrastructure
Cashflow - A Tale of Stable Income
Property - An Asset Liability or Cashflow?
It has also often been explained that between renting versus owning a property, the earlier leaves one with nothing, while the later produces an asset at the end of the day.
I've been thinking though, do the maths really work out right today? I own my condo, apparently valued at about $1m today. Or maybe a bit less, given the softening property market. What would it cost to rent?
Suppose I were 65 years today (or should I be thinking 67 now!?), and assuming I have 30 years to go, paying a monthly rental instead of $3,000 a month - that works out to be $1.08m in total, without accounting for the time value of money. Seems logical to own my property rather than rent, since I would have paid the equivalent sum over time?
But let's consider an alternate future. Suppose I monetise the $1m by selling off my property and then investing that $1m, generating a 4% real return on the investment, giving me $40,000 a year. That would actually be more than the $36,000 a year in rental.
Does this look a real proposition to ponder? Will the rental rate hold, or will it increase over time? With age and time, do the equations change?
Related:
Post National Day Rally 2014 - Education, CPF and Infrastructure
Cashflow - A Tale of Stable Income
Property - An Asset Liability or Cashflow?
06 October 2014
The Good News About Retirement - How much do we need to retire on?
Just how much do we need to retire on? Some rule of thumbs I've seen suggested 60-75% of last earned income as a reasonable estimate. Others I've seen have highlighted the need to provision more for medical expenses as one ages. In general, there is also the factor of inflation that has to be considered.
In some illustrations on investment returns, the term "real returns" is used. This refers to the return after deducting off inflation. Hence, a real return of 3% against a backdrop of 2% inflation would actually a mean an absolute return of 5%.
In a post on The Good News About Retirement by Darrow Kirkpatrick from US perspective, it was actually suggested that expenses are likely to decline with age, and highlighted health care support from ObamaCare, the enduring US Social Security system, availability of part-time work and bonus cushioning from inheritance. Darrow concluded that a prudent lifestyle and a reasonable effort to save would be pleasantly rewarded by the realities of retirement. Quite a significantly different point of view.
Taking our Singapore context, our equivalent would probably be our Medishield plans and Medisave for health care, pension contribution from CPF Life based on the CPF minimum sum contribution in CPF-RA/SA, and as a bonus, any inheritance comes tax free. We seem in pretty good shape.
In some illustrations on investment returns, the term "real returns" is used. This refers to the return after deducting off inflation. Hence, a real return of 3% against a backdrop of 2% inflation would actually a mean an absolute return of 5%.
In a post on The Good News About Retirement by Darrow Kirkpatrick from US perspective, it was actually suggested that expenses are likely to decline with age, and highlighted health care support from ObamaCare, the enduring US Social Security system, availability of part-time work and bonus cushioning from inheritance. Darrow concluded that a prudent lifestyle and a reasonable effort to save would be pleasantly rewarded by the realities of retirement. Quite a significantly different point of view.
Taking our Singapore context, our equivalent would probably be our Medishield plans and Medisave for health care, pension contribution from CPF Life based on the CPF minimum sum contribution in CPF-RA/SA, and as a bonus, any inheritance comes tax free. We seem in pretty good shape.
29 September 2014
Saving Money from Not Owning a Car
Cars really cost a bomb these days with the ridiculous Certificate of Entitlement price tag. It's hard to get any decent family car for anything less than $100,000.
In my past buy years ago, I was able to pay down quite a bit upfront and took up loans at about $500 per month. I figured that it would cost about $1,000 per month after amortising in annual insurance and road tax, as well as petrol consumption and routine preventive maintenance.
Then I figured, what if I don't drive to work? I took the bus and train to work, and took cab to get home at night. Buses and trains are cheap. But cab rides are not. It costs about $25 per ride for me. Assuming I do that about 20 times a month, that works out to be $500 per month. Still cheaper than owning and operating a car. Definitely a better deal. And I get 'chauffered' home too!
However, cab rates have been on the rise. And traffic conditions haven't been great either. My ride typically took 40 minutes on a good day, and can be as long as an hour on a lousy day. Especially when it is raining, when there is an accident or road work along the way. Lots of time spent waiting for a cab too.
I came to realise that I could sometimes get home faster by taking the bus and train instead. It's also an hour's journey. Cost a lot less, and I get a bit of exercise from walking at the same time.
Come to think of it, $500 a month avoided would amount $6,000 a year saved. That's a lot when invested and compounded over 20 years. In fact, if this sum was placed into the Supplementary Retirement Scheme, that would generate further tax avoidance as well!
So, operate a car, take cab, or stick to cheap public transportation? It's all about the Maslow hierarchy of needs. For now, I will generally stick to BMW (Bus, MRT, Walk) and the occasional cab.
In my past buy years ago, I was able to pay down quite a bit upfront and took up loans at about $500 per month. I figured that it would cost about $1,000 per month after amortising in annual insurance and road tax, as well as petrol consumption and routine preventive maintenance.
Then I figured, what if I don't drive to work? I took the bus and train to work, and took cab to get home at night. Buses and trains are cheap. But cab rides are not. It costs about $25 per ride for me. Assuming I do that about 20 times a month, that works out to be $500 per month. Still cheaper than owning and operating a car. Definitely a better deal. And I get 'chauffered' home too!
However, cab rates have been on the rise. And traffic conditions haven't been great either. My ride typically took 40 minutes on a good day, and can be as long as an hour on a lousy day. Especially when it is raining, when there is an accident or road work along the way. Lots of time spent waiting for a cab too.
I came to realise that I could sometimes get home faster by taking the bus and train instead. It's also an hour's journey. Cost a lot less, and I get a bit of exercise from walking at the same time.
Come to think of it, $500 a month avoided would amount $6,000 a year saved. That's a lot when invested and compounded over 20 years. In fact, if this sum was placed into the Supplementary Retirement Scheme, that would generate further tax avoidance as well!
So, operate a car, take cab, or stick to cheap public transportation? It's all about the Maslow hierarchy of needs. For now, I will generally stick to BMW (Bus, MRT, Walk) and the occasional cab.
26 September 2014
Lower Expense Ratios for CPFIS Unit Trust Funds
From a Business Times report, it looks like CPF Investment Scheme (CPFIS) is going to see limits to the Expense Ratios of authorised unit trust funds being lowered. Money market funds for instance will be lowered form 0.65% to 0.35% while higher risk funds (typically equities) will be lowered from 1.95% to 1.75%.
Generally, it's a good idea for unit trust funds to have lower expense ratios as that means less leakage for investors. I guess less profits for fund houses. Some may well exit? My guess is that it will lead to less choices available for unit trust investors using CPFIS.
I wish there could be more fund houses that offer index funds for unit trust instead. The fund houses wouldn't need a large (and hence expensive!) investment team to do stock picking since they would only need to track the index. It would provide investors with a well diversified albeit 'lazy' approach in lieu of buying ETF from the stock exchange.
Currently, there are only the Infinity (US, Europe, Global) series of unit trust that are like that. Unfortunately, their expense ratios do not match up as well with ETFs as they are still comparatively high.
Generally, it's a good idea for unit trust funds to have lower expense ratios as that means less leakage for investors. I guess less profits for fund houses. Some may well exit? My guess is that it will lead to less choices available for unit trust investors using CPFIS.
I wish there could be more fund houses that offer index funds for unit trust instead. The fund houses wouldn't need a large (and hence expensive!) investment team to do stock picking since they would only need to track the index. It would provide investors with a well diversified albeit 'lazy' approach in lieu of buying ETF from the stock exchange.
Currently, there are only the Infinity (US, Europe, Global) series of unit trust that are like that. Unfortunately, their expense ratios do not match up as well with ETFs as they are still comparatively high.
Inspirations from a Lin Dan Badminton Match - Traits of an Investor?
On Friday afternoon (26 Sep 2014), I had the opportunity to watch a Round of 16 badminton men's singles match of Asian Games 2014, pitting Lin Dan (China) against a Hong Kong player. By no means was it a pushover match. But what was inspiring was the way the game went towards the end.
Lin Dan had won the first game, and this was the second game. He was down 20-13. It looked like it was headed towards a third game. How to survive so many game points? But point by point, he clawed back, patiently, determined, unfettered - 9 points in total. Ultimately it ended 22-20 as he beat his worthy opponent. Class triumphed. Sparkles of the talent in him in the last few points secured.
Patience, determination, with an end in mind. Are these the traits needed for an investor as well?
Patience. Stick with a winning strategy. One that works over the long term. Exploit the time value of money.
Determination. Even as market gyrates on its ups and downs, withstand it. Avoid the urge to trade aimlessly.
An End in Mind. Know what the end goal is and compound the investment towards the end target, whatever it may be for the individual - $1m, $2m, whatever.
I wait in relish and hope for a final match up once again for a rematch between Datuk Lee Chong Wei (Malaysia) and Lin Dan (China).
Lin Dan had won the first game, and this was the second game. He was down 20-13. It looked like it was headed towards a third game. How to survive so many game points? But point by point, he clawed back, patiently, determined, unfettered - 9 points in total. Ultimately it ended 22-20 as he beat his worthy opponent. Class triumphed. Sparkles of the talent in him in the last few points secured.
Patience, determination, with an end in mind. Are these the traits needed for an investor as well?
Patience. Stick with a winning strategy. One that works over the long term. Exploit the time value of money.
Determination. Even as market gyrates on its ups and downs, withstand it. Avoid the urge to trade aimlessly.
An End in Mind. Know what the end goal is and compound the investment towards the end target, whatever it may be for the individual - $1m, $2m, whatever.
I wait in relish and hope for a final match up once again for a rematch between Datuk Lee Chong Wei (Malaysia) and Lin Dan (China).
Money as You Grow - Financial Education Resources
Resources on Financial Education are just plentiful on the Internet. Here are several:
Many blogs on the subject of Personal Finance and Investment provide wonderful introductory explanations of these topics. Investopedia is probably the most comprehensive, the ultimate Wiki for the investment peons.
Orcam Group Educational Resources does a decent job of extending the educational materials further. You may want to give it a go.
For a kids friendly version, you may want to try the Secret Millionaires Club for a cartoon web series hosted by Warren Buffet. Warren shares a piece of wisdom in each episode. Guess he gave up on the adults and decided to start working on the kids instead!
Money as You Grow is a financial education package for children. It is for the US market, with different activities for children at different ages from 3 to 18+.
For Singaporeans, a very good source is the serious of talks organised by SIAS MyMoney series to educate Singaporean investors.
CPF has also been publishing periodically their In Touch magazine to better explain the CPF system and all its intricacies, as well as articles on health and financial education:
SGX is generating a suite of SGX E-Videos to educate the investment public at large. They appear to be in the midst of production, with more videos planned. The clips are actually published on YouTube.
Happy surfing!
Many blogs on the subject of Personal Finance and Investment provide wonderful introductory explanations of these topics. Investopedia is probably the most comprehensive, the ultimate Wiki for the investment peons.
Orcam Group Educational Resources does a decent job of extending the educational materials further. You may want to give it a go.
Money as You Grow is a financial education package for children. It is for the US market, with different activities for children at different ages from 3 to 18+.
For Singaporeans, a very good source is the serious of talks organised by SIAS MyMoney series to educate Singaporean investors.
CPF has also been publishing periodically their In Touch magazine to better explain the CPF system and all its intricacies, as well as articles on health and financial education:
SGX is generating a suite of SGX E-Videos to educate the investment public at large. They appear to be in the midst of production, with more videos planned. The clips are actually published on YouTube.
Happy surfing!
16 September 2014
Cessation of IShares ETF
Seems like IShares will cease offering several Exchange Traded Funds (ETF) to retail investors in Singapore from 14 Oct 2014. These include:
Not sure why they're exiting. Perhaps the take up volume has been too low to be worth their while. There is another ETF available for the Singapore fund, so that's not too bad. But looks like retail investors will have to turn to the US stock market to invest in S&P500 or US Technology ETFs.
The usual discussions that compare Unit Trust versus Exchange Traded Funds have never shed insight on something like this happening to ETF - i.e. "shelving". It's more commonly seen with Unit Trust as those with poor performance tend to be closed at some point, leading to survivorship effect - i.e. the remaining funds appear to show good track records, and hence create the impression that an investor can get good returns from Unit Trusts.
I wonder what will be the effect on the bid/ask price from here on? The last traded price was around US$199.
Thumbs down.
- IShares Core S&P500 ETF
- IShares MSCI Singapore ETF
- IShares US Technology ETF
Not sure why they're exiting. Perhaps the take up volume has been too low to be worth their while. There is another ETF available for the Singapore fund, so that's not too bad. But looks like retail investors will have to turn to the US stock market to invest in S&P500 or US Technology ETFs.
The usual discussions that compare Unit Trust versus Exchange Traded Funds have never shed insight on something like this happening to ETF - i.e. "shelving". It's more commonly seen with Unit Trust as those with poor performance tend to be closed at some point, leading to survivorship effect - i.e. the remaining funds appear to show good track records, and hence create the impression that an investor can get good returns from Unit Trusts.
I wonder what will be the effect on the bid/ask price from here on? The last traded price was around US$199.
Thumbs down.
15 September 2014
Retiring at Age 60 at $2,000 a Month
TODAY had an article about the lovely Tey family of four. The husband is age 37 and wife is 36. Their two daughters are 6 and 2 years old. The couple plan to retire at age 60 with a monthly income of $2,000 per month for 30 years. By age 60, their kids should have completed their tertiary education as well.
It is commendable that they project their income need to be so low. I would assume that they are living in a HDB flat, no aircon, no car, no health issues and no parents they have to look after. Possibly no mobile phones, no cable TV as well? Else, it's difficult to see how $2,000 is viable.
The couple appear to be risk adverse and have largely socked away savings in fixed income products. Not going to go far with this risk adverse posture. But they don't really have the need to take higher risk given their very low target. Thought they still have time on their side. 23 to 24 years in fact.
My first impression was that $2,000 is easy. If they are both earning a healthy salary and sock up their CPF-SA to the max, they would more than meet that retirement need without requiring further retirement funds. But they would have to tide through the first five years of retirement (age 60 to 64) with another $120,000. Doesn't seem difficult.
I was surprised that the article mentioned $800,000 as the retirement savings goal to fund this retirement. As I mentioned earlier, just max out the CPF-SA (CPF-Life) for both, plus another $120,000, and they would be well on their way. To be on the safe side, add more for an emergency fund. Perhaps they are not Singaporeans?
Even if the retirement is to be funded without the use of CPF-Life payout, I was wondering why $800,000 is needed to meet the $2,000 a month goal? Using the 4% extraction norm, $800,000 would offer $32,000 a year, or $2,667 a month. That's far more than necessary. Alternatively, if we assume $2,000 x 12 months x 30 years, we get $720,000. Again, $800,000 seems excessive. Probably inflation has been factored in, which is reasonable. Otherwise, without factoring for inflation, $600,000 (@4% dividends/income) should do it. Such a later approach carries risk of course if the underlying portfolio value drops.
How would this plan de-rail? My thoughts are:
Wish them all the best and a steady route to retirement.
Disclaimer: This is just a personal opinion, I'm not a financial advisor, nor trained in the art.
It is commendable that they project their income need to be so low. I would assume that they are living in a HDB flat, no aircon, no car, no health issues and no parents they have to look after. Possibly no mobile phones, no cable TV as well? Else, it's difficult to see how $2,000 is viable.
The couple appear to be risk adverse and have largely socked away savings in fixed income products. Not going to go far with this risk adverse posture. But they don't really have the need to take higher risk given their very low target. Thought they still have time on their side. 23 to 24 years in fact.
My first impression was that $2,000 is easy. If they are both earning a healthy salary and sock up their CPF-SA to the max, they would more than meet that retirement need without requiring further retirement funds. But they would have to tide through the first five years of retirement (age 60 to 64) with another $120,000. Doesn't seem difficult.
I was surprised that the article mentioned $800,000 as the retirement savings goal to fund this retirement. As I mentioned earlier, just max out the CPF-SA (CPF-Life) for both, plus another $120,000, and they would be well on their way. To be on the safe side, add more for an emergency fund. Perhaps they are not Singaporeans?
Even if the retirement is to be funded without the use of CPF-Life payout, I was wondering why $800,000 is needed to meet the $2,000 a month goal? Using the 4% extraction norm, $800,000 would offer $32,000 a year, or $2,667 a month. That's far more than necessary. Alternatively, if we assume $2,000 x 12 months x 30 years, we get $720,000. Again, $800,000 seems excessive. Probably inflation has been factored in, which is reasonable. Otherwise, without factoring for inflation, $600,000 (@4% dividends/income) should do it. Such a later approach carries risk of course if the underlying portfolio value drops.
How would this plan de-rail? My thoughts are:
- Unfunded education expenses for their kids (also mentioned in the article)
- Expensive overseas holidays
- Medical crisis
- Inflation spike (Internet, phone, power/gas/water utilities, food)
- Bought a condo
- Bought a car
- Took silly risks with their retirement portfolio (like oil pods, gold and property scams, etc)
Wish them all the best and a steady route to retirement.
Disclaimer: This is just a personal opinion, I'm not a financial advisor, nor trained in the art.
10 September 2014
Gaining Investor Knowledge through E-Videos at SGX Academy
Looks like SGX is generating a suite of SGX E-Videos to educate the investment public at large. They appear to be in the midst of production, with more videos planned. The clips are actually published on YouTube.
For other sources of education materials, you may want to also refer to other resources mentioned at: Investopedia, the Secret Millionaires Club and MyMoney
Financial education resources are plentiful on the Internet. All one needs is access, time and willingness to learn.
For other sources of education materials, you may want to also refer to other resources mentioned at: Investopedia, the Secret Millionaires Club and MyMoney
Financial education resources are plentiful on the Internet. All one needs is access, time and willingness to learn.
09 September 2014
Giving Back to Society - SG Gives
Lee Chin Wai blogged in Giving Back to Society about SG Gives, a portal for the public to donate to charitable causes in Singapore. I felt this is a worthy cause to promote. So, I'm lending support by adding this link at my blog as well.
According to the SG Gives website, it started in 2010 as an initiative of the National Volunteer & Philanthropy Centre (itself a non-profit organisation) to facilitate the improvement in quality and quantity of giving through a low cost, high reach tool for charities (excluding religious bodies) to raise funds.
For a tax savings perspectives, you may want to read Giving from the Heart - 80 Good Deeds as well.
According to the SG Gives website, it started in 2010 as an initiative of the National Volunteer & Philanthropy Centre (itself a non-profit organisation) to facilitate the improvement in quality and quantity of giving through a low cost, high reach tool for charities (excluding religious bodies) to raise funds.
For a tax savings perspectives, you may want to read Giving from the Heart - 80 Good Deeds as well.
08 September 2014
SIA - Potential Stone
This recommendation from several months back on SIA's shares actually said "Potential Stone"! Gee wheez. Fascinating. The analyst must have been pretty high that day.
Come to think of it, hardly ever see any that says "Sell". I guess when they say "Hold", they really mean "Sell"?
02 September 2014
Hour Glass - Tick Tock and One Becomes Three
Interestingly, Hour Glass is planning to split its shares at a ratio of 3 shares for every 1 share held - see Hour Glass Announcement. All else being unchanged, that would mean that the share price will drop to one third the current price when that takes place. At about $1.80 per share right now, that would make it $0.60 per share thereafter.
While it could possibly make their shares more affordable for trading, I'm not sure that it offers any tangible benefit. $1.80 per share isn't that far out of reach for retail investors. This is unlike those Jardine shares that require tens of thousand dollars. Besides, the new lot size of 100 shares will kick in by Jan 2015. So it's only $180 to own 100 shares.
So what then is the real benefit to split now? I view with some serious concerns, particularly in light of the break-up of the husband and wife team that used to run this company. Their son is running it now. What does the future portend?
While it could possibly make their shares more affordable for trading, I'm not sure that it offers any tangible benefit. $1.80 per share isn't that far out of reach for retail investors. This is unlike those Jardine shares that require tens of thousand dollars. Besides, the new lot size of 100 shares will kick in by Jan 2015. So it's only $180 to own 100 shares.
So what then is the real benefit to split now? I view with some serious concerns, particularly in light of the break-up of the husband and wife team that used to run this company. Their son is running it now. What does the future portend?
Retail Bonds for Retirement Income (My Name is Bond)
I had previously griped about the lack of access for retail investors to invest into bonds in 5 Wishes for X'mas 2014.
"Why can't those 5%, 6%, 7% coupon paying bonds be made available to retail investors? At $250,000 a pop, they're completely out of reach for most. Why the exclusivity when bonds could really lower the risk profile of an investor's portfolio? Imagine all those education and retirement portfolios aiming to get a reasonably safe yield or 4% extraction for retirement?"
Well, the good news is that the Consultation Paper on Facilitating Bond Offerings to Retail Investors (MAS) is out! Looks like there is a good possibility that retail investors would in due course be able to invest in bonds at smaller lot sizes.
Yet another of my early X'mas wish list being realised.
Unfortunately, if the smaller lot size for bonds is only offered through retailing in the secondary market, retail investors may not gain the full benefit of the bond coupon rates as it could very well normalise back to the risk-free level of the prevailing risk-free market rates of SGS bonds, padded with a difference based on the risk profile of the underlying company?
It is after all a consultation paper and the final form could still evolve. In any case, it is an interesting development.
Wouldn't it be great to be able to take $100,000 (excess above minimum sum from CPF at age 55) and invest in a range of bonds at $10,000 per series, giving >4% coupons (i.e. >$4,000 per annum or >$330 per month)? That's a personal bond unit trust!
"Why can't those 5%, 6%, 7% coupon paying bonds be made available to retail investors? At $250,000 a pop, they're completely out of reach for most. Why the exclusivity when bonds could really lower the risk profile of an investor's portfolio? Imagine all those education and retirement portfolios aiming to get a reasonably safe yield or 4% extraction for retirement?"
Well, the good news is that the Consultation Paper on Facilitating Bond Offerings to Retail Investors (MAS) is out! Looks like there is a good possibility that retail investors would in due course be able to invest in bonds at smaller lot sizes.Yet another of my early X'mas wish list being realised.
Unfortunately, if the smaller lot size for bonds is only offered through retailing in the secondary market, retail investors may not gain the full benefit of the bond coupon rates as it could very well normalise back to the risk-free level of the prevailing risk-free market rates of SGS bonds, padded with a difference based on the risk profile of the underlying company?
It is after all a consultation paper and the final form could still evolve. In any case, it is an interesting development.
Wouldn't it be great to be able to take $100,000 (excess above minimum sum from CPF at age 55) and invest in a range of bonds at $10,000 per series, giving >4% coupons (i.e. >$4,000 per annum or >$330 per month)? That's a personal bond unit trust!
27 August 2014
Endowment Plans for Child Education
DIYInsurance published an article recently comparing several Child Education Endowment Plans (see 4 Endowment Plans Specially Designed for Your Child's Education). Plans seem logical and helpful to provide the financial support for education at different points of a child's typical education profile. The scheme from NTUC offer additional supplements upon entering the first year of each level progressed. Good plans I think for those who prefer to completely outsource their financial needs (a.k.a. financially challenged?).
But the one thing that struck me was that all the plans are projected at internal rates of return of below 4%. I have also recently examined all my existing insurance plans and came to a similar conclusion as well (see Can Insurance Policies Return Better Than 4%?).
4% is also the current interest rate for CPF-SA/MA.
4% seems to be a magic number - i.e. a risk free rate.
Hard to appreciate why I would want to place my money giving return of <4% when I would probably be better of buying say the STI ETF? For that matter, a good soccer team of SGX stocks would probably do as well (My World Cup Team (of Dividend Value Stocks). Of course, these do come with risks.
But the one thing that struck me was that all the plans are projected at internal rates of return of below 4%. I have also recently examined all my existing insurance plans and came to a similar conclusion as well (see Can Insurance Policies Return Better Than 4%?).
4% is also the current interest rate for CPF-SA/MA.
4% seems to be a magic number - i.e. a risk free rate.
Hard to appreciate why I would want to place my money giving return of <4% when I would probably be better of buying say the STI ETF? For that matter, a good soccer team of SGX stocks would probably do as well (My World Cup Team (of Dividend Value Stocks). Of course, these do come with risks.
19 August 2014
Buying Term Insurance Direct
Looks like the means to buy Term Insurance directly online will soon be a reality. Alf wondered why he should be feeling excited about this? He had started work not long ago and barely had enough savings left at the end of each month as it is. It was very hard for him to be thinking about paying money for something where there will not be any return if he didn't die! What's the point he wondered?
Over lunch, he bounced this subject off with his colleagues and gathered some interesting insights. The various views he gathered were as follows:
One of his colleagues, Roy, met his insurance agent over lunch just a week ago and had asked his insurance friend, Melvin, this very same question. In particular, Roy had asked Melvin how this would affect his insurance sales?
Melvin was apparently not too perturbed. He recounted a recent experience. His client had bought a hospitalisation plan from him seven years ago. Unfortunately, the client suffered a stroke recently and was hospitalised. In the process, his doctor told him that his ECG showed that he had in fact suffered a stroke before, and this wasn't the first time. It came as quite a shock to his client. Unfortunately, the doctor would not be able to tell him when the last incident occurred. And this became the crux of a problem!
Because of this past history of a prior stroke, the insurance company rejected his client's claim for this latest hospitalisation! The issue was whether the prior stroke had occurred before he took up the policy, or after. Seems the onus was on the client to show proof. The client wasn't aware of any incident before and was very perplexed.
Melvin asked Roy how would he feel if this had happened to Roy. Roy felt that he would be very upset and would probably have terminated his policy there and then!
"Precisely!" said Melvin. He went on to relate that his client had not done any medical check-up throughout this time, and could not produce any evidence to show proof that he was healthy at the point that he took up the insurance policy.
Melvin said that as he probed further, he found out that his client had gone for his National Service medical check-up in the year after he took up the policy. The check-up included an ECG. Hope! He was able to help his client obtain his medical record from MINDEF which showed that he was totally healthy then. With that, Melvin was able to help his client secure approval from the insurance company. So it ended on a happy note. Or perhaps not, since his client still had to recover from the stroke anyway. But at least, the medical costs had been alleviated.
The point, as Melvin related to Roy, was that if one was to buy direct, the client would be very much on his own and would not have the benefit of an experienced insurance agent to advise him/her. Melvin felt that there was a role for the insurance agent to provide value add services. He feared that as the new scheme kicked in, there would be many people who would not realise the importance of making the necessary declarations, and ill equipped to deal with claims downstream. They would face frustration and disappointment when faced with difficulties like this.
Alf wondered very hard as he pondered this story that Roy had shared with him. In his head however, the phrase "buy term, invest the rest" was nonetheless rolling through his thoughts.
Over lunch, he bounced this subject off with his colleagues and gathered some interesting insights. The various views he gathered were as follows:
- Waste of money, because no returns.
- It's your beneficiary who will gain, not you.
- The insurance is only to protect your dependents, in case anything happen to you; and only if they are dependent on you for the lost income.
- It's best to start term insurance early, the rates are low, and will remain so.
- It's best to start term insurance early, while you're healthy; else there will be exclusions or become more expensive due to loading.
- You don't need the term insurance when you have sufficient retirement funds and income.
- You would still need a hospitalisation and surgery insurance; term doesn't cover those. [Didn't die, was saved, but hospitalisation is expensive! Duh.]
- You would still need complementary insurance for critical illnesses [Dying slowly, likely will eventually die! But meanwhile ... sheesh.]
One of his colleagues, Roy, met his insurance agent over lunch just a week ago and had asked his insurance friend, Melvin, this very same question. In particular, Roy had asked Melvin how this would affect his insurance sales?
Melvin was apparently not too perturbed. He recounted a recent experience. His client had bought a hospitalisation plan from him seven years ago. Unfortunately, the client suffered a stroke recently and was hospitalised. In the process, his doctor told him that his ECG showed that he had in fact suffered a stroke before, and this wasn't the first time. It came as quite a shock to his client. Unfortunately, the doctor would not be able to tell him when the last incident occurred. And this became the crux of a problem!
Because of this past history of a prior stroke, the insurance company rejected his client's claim for this latest hospitalisation! The issue was whether the prior stroke had occurred before he took up the policy, or after. Seems the onus was on the client to show proof. The client wasn't aware of any incident before and was very perplexed.
Melvin asked Roy how would he feel if this had happened to Roy. Roy felt that he would be very upset and would probably have terminated his policy there and then!
"Precisely!" said Melvin. He went on to relate that his client had not done any medical check-up throughout this time, and could not produce any evidence to show proof that he was healthy at the point that he took up the insurance policy.
Melvin said that as he probed further, he found out that his client had gone for his National Service medical check-up in the year after he took up the policy. The check-up included an ECG. Hope! He was able to help his client obtain his medical record from MINDEF which showed that he was totally healthy then. With that, Melvin was able to help his client secure approval from the insurance company. So it ended on a happy note. Or perhaps not, since his client still had to recover from the stroke anyway. But at least, the medical costs had been alleviated.
The point, as Melvin related to Roy, was that if one was to buy direct, the client would be very much on his own and would not have the benefit of an experienced insurance agent to advise him/her. Melvin felt that there was a role for the insurance agent to provide value add services. He feared that as the new scheme kicked in, there would be many people who would not realise the importance of making the necessary declarations, and ill equipped to deal with claims downstream. They would face frustration and disappointment when faced with difficulties like this.
Alf wondered very hard as he pondered this story that Roy had shared with him. In his head however, the phrase "buy term, invest the rest" was nonetheless rolling through his thoughts.
18 August 2014
Post National Day Rally 2014 - Education, CPF and Infrastructure
The National Day Rally 2014 has come and gone.
Education
So we started with the subject of "education" and discovered the line that multiple pathways to success need not necessarily require a degree. Can't have a whole country of just managers and no doers isn't it? Skilled labour need to be respected in a balanced world. And for a first, we find Prime Minister interviewing a cohort from a wide spectrum. Keppel had a field day of free advertisement. We are re-educated.
Retirement
Then we have Prime Minister becoming a Financial Adviser. As he said, last year he was a Property Agent, but things haven't been looking up, so he has switched to become a Financial Adviser. I thought he did a fantastic job to link the logic behind why property is part of the CPF system, and the many options to monetise the property for retirement income.
I felt his advise for a retiree to continue to own a property, even if staying with their children, a particular insightful remark. He must surely have seen the many cases when the parents had fall-outs with their children, or worse, cheated by their children, and then having no roof over their head. Abandoned.
And so we have the declaration that the Minimum Sum for the CPF Special Account would be raised to $161,000 in 2015, and the statement that there would not be a further increase thereafter, subject to a review from time to time (ah, always leave the option open!). For me, this was a boo-hoo-hoo moment. I had so looked forward to continuing benefiting from the 4% return with a continually revised ceiling. Where else to get this kind of returns for a risk-free investment? Unfortunately that is not to be.
$161,000 it shall be. And no way am I going to pledge my property to cash out half the sum at age 55. I want my full return of $1,200 per month from age 62 onwards (I was previously under the impression that this sum would only be received from age 65).
Infrastructure
Finally, the great infrastructure development. Having discussed about the great airport move from Paya Lebar Airport/Airbase to the expanded Changi Airport over the next few decades along with the Jewel of the East last year, Prime Minister described with much graphical details the great Jewel of the West this year.
We already have Jem and Big Box, and the new but delayed General Hospital at Jurong East. But the elaborate plan looked like the creation of a New York Central Park in the form of the Jurong Lake Gardens. A new monumental go-to place in the form of a new Science Centre, and the possibility of a future Express Train terminal to Malaysia. Certainly a major transformation from the current drab and boring looking Chinese and Japanese Gardens, which for years have languished in a never changing state, seldom used, venues of zero excitement. Transformed, it shall be. "There is only do, or do not", as Yoda might say.
Concluding Remarks
As a foreign dignitary once said, each year he come by Singapore, he sees something new and exciting. The landscape is ever changing. This trend looks set to continue. Change is certainly a consistency.
Looks like the construction industry will continue to have positive prospects in the years ahead. Major infrastructure development will continue to place demand - numerous MRT lines criss-crossing our tiny island, highways realigned and expanded, monumental artistic buildings and gardens rebuilt, bigger and better. The list goes on.
I am inspired by the exciting future of our country with each passing year. Toast!
p/s: Tat Hong (cranes), Kingsmen Creatives (artwork), Pan-United (cement) could be potential beneficiaries?
Education
So we started with the subject of "education" and discovered the line that multiple pathways to success need not necessarily require a degree. Can't have a whole country of just managers and no doers isn't it? Skilled labour need to be respected in a balanced world. And for a first, we find Prime Minister interviewing a cohort from a wide spectrum. Keppel had a field day of free advertisement. We are re-educated.
Retirement
Then we have Prime Minister becoming a Financial Adviser. As he said, last year he was a Property Agent, but things haven't been looking up, so he has switched to become a Financial Adviser. I thought he did a fantastic job to link the logic behind why property is part of the CPF system, and the many options to monetise the property for retirement income.
I felt his advise for a retiree to continue to own a property, even if staying with their children, a particular insightful remark. He must surely have seen the many cases when the parents had fall-outs with their children, or worse, cheated by their children, and then having no roof over their head. Abandoned.
And so we have the declaration that the Minimum Sum for the CPF Special Account would be raised to $161,000 in 2015, and the statement that there would not be a further increase thereafter, subject to a review from time to time (ah, always leave the option open!). For me, this was a boo-hoo-hoo moment. I had so looked forward to continuing benefiting from the 4% return with a continually revised ceiling. Where else to get this kind of returns for a risk-free investment? Unfortunately that is not to be.
$161,000 it shall be. And no way am I going to pledge my property to cash out half the sum at age 55. I want my full return of $1,200 per month from age 62 onwards (I was previously under the impression that this sum would only be received from age 65).
Infrastructure
Finally, the great infrastructure development. Having discussed about the great airport move from Paya Lebar Airport/Airbase to the expanded Changi Airport over the next few decades along with the Jewel of the East last year, Prime Minister described with much graphical details the great Jewel of the West this year.
We already have Jem and Big Box, and the new but delayed General Hospital at Jurong East. But the elaborate plan looked like the creation of a New York Central Park in the form of the Jurong Lake Gardens. A new monumental go-to place in the form of a new Science Centre, and the possibility of a future Express Train terminal to Malaysia. Certainly a major transformation from the current drab and boring looking Chinese and Japanese Gardens, which for years have languished in a never changing state, seldom used, venues of zero excitement. Transformed, it shall be. "There is only do, or do not", as Yoda might say.
Concluding Remarks
As a foreign dignitary once said, each year he come by Singapore, he sees something new and exciting. The landscape is ever changing. This trend looks set to continue. Change is certainly a consistency.
Looks like the construction industry will continue to have positive prospects in the years ahead. Major infrastructure development will continue to place demand - numerous MRT lines criss-crossing our tiny island, highways realigned and expanded, monumental artistic buildings and gardens rebuilt, bigger and better. The list goes on.
I am inspired by the exciting future of our country with each passing year. Toast!
14 August 2014
Views on Youngsters Not Having Enough Savings
On the radio this morning, the DJ was talking about our youngsters not having much savings and invited callers to share their views. The comments that came in include:
Oh dear, oh dear. CPF, where got enough? It's only enough for the lower income groups. They don't demand as much and so they can get by with the little income stream post retirement. Alternatively, you better have a lot of kids who are good to you. These youngsters might want to read (1) CPF as an asset that generates income (by SGYI), and (2) my past musings on CPF.
Ignorance.
I'll Save, if my Boss is Prepared to Pay Me More!
If he/she does pay you more, you think you'll save? The more you get, the more you spend. That's lifestyle inflation. It's the discipline to always set aside a sum for investment or savings that's going to make it work. Pay yourself first. Take a pay cut - i.e. slice a portion away from the monthly salary to park into savings or investments.
Lack of ownership.
I Love Online Shopping, How to Save?
I don't know how much online shopping one needs. Are those wants or needs? Beyond a certain point, it's just an addiction. Piles of junk and untouched items taking up space and collecting dust thereafter. The pack rat in a modern form.
Indulgence.
Concluding Remarks
It seems the young can't see the need to save and invest. Retirement needs is a future that is still far away.
It is really hard to ask the young to think so far ahead. Living by the day is pretty normal isn't it? Each eve to the next paycheck, the bank account tends towards zero.
We learn so much maths in school, but we never taught our kids to apply the same maths towards financial planning. Wouldn't it be so much more interesting?
Chapter 1 - Algebra, zzz.
Chapter 2 - Calculus, zzz.
Chapter 3 - Graphs, zzz.
:
Chapter 10 - Financial Planning - how it all comes together!?
Education.
- CPF is good enough.
- I'll save, if only my boss is prepared to pay me more!
- I love online shopping, how to save?
Oh dear, oh dear. CPF, where got enough? It's only enough for the lower income groups. They don't demand as much and so they can get by with the little income stream post retirement. Alternatively, you better have a lot of kids who are good to you. These youngsters might want to read (1) CPF as an asset that generates income (by SGYI), and (2) my past musings on CPF.
Ignorance.
I'll Save, if my Boss is Prepared to Pay Me More!
If he/she does pay you more, you think you'll save? The more you get, the more you spend. That's lifestyle inflation. It's the discipline to always set aside a sum for investment or savings that's going to make it work. Pay yourself first. Take a pay cut - i.e. slice a portion away from the monthly salary to park into savings or investments.
Lack of ownership.
I Love Online Shopping, How to Save?
I don't know how much online shopping one needs. Are those wants or needs? Beyond a certain point, it's just an addiction. Piles of junk and untouched items taking up space and collecting dust thereafter. The pack rat in a modern form.
Indulgence.
Concluding Remarks
It seems the young can't see the need to save and invest. Retirement needs is a future that is still far away.
It is really hard to ask the young to think so far ahead. Living by the day is pretty normal isn't it? Each eve to the next paycheck, the bank account tends towards zero.
We learn so much maths in school, but we never taught our kids to apply the same maths towards financial planning. Wouldn't it be so much more interesting?
Chapter 1 - Algebra, zzz.
Chapter 2 - Calculus, zzz.
Chapter 3 - Graphs, zzz.
:
Chapter 10 - Financial Planning - how it all comes together!?
Education.
4 Ways to Reduce Spending (aka Spend to Save?)
Spend to Save? That's a tagline that's such an oxymoron. But here goes with my 4 ways to reduce spending.
Credit Cards
Dr Wealth shared about 6 ways to reduce monthly expenses without compromising lifestyle. One idea was to use credit cards whenever we can so that we can score points and benefit from the card discounts. He also made an important point that this would go well only if one has the discipline to pay off in full each month, and not to allow ourselves to fall into the debt trap. It's really a silly idea to owe credit card debts. It's a downhill spiral that squeezes away our hard earned money paying interests. Worse, it's easily 24% per annum! I'm pretty disciplined.
I use a few Visa credit cards and found several to be good deals. The UOB One card and the Citibank Dividend card offer various cash rebates. Comes in the form of either a quarterly cash-back to offset the bills, or credits to offset the next payment at selected merchants. So I use the credit cards wherever possible for payments and have benefited substantively from these rebates. It all adds up. Worth a thought?
And, be stingy. Don't pay the annual card fees. The banks are going to hate me for this. Seek the waiver when the fee is due. Often, it's just a phone call away. Most banks have automated this process. I'm not even going to agree to pay half. They've always waived the fee, so long as there has been some spending. I'm 'ngiaow'.
I would advise, go get the darn NTUC Fairprice Card if you're shopping at NTUC supermarkets frequently. The points really add up very quickly. And it gets bigger, the bigger your family is. The points are redeemable to offset against payments and can be done at their check-out lines. Quite convenient, really. Except, when the cashier happens to be blur. Which happens, often enough. The elderly aunties (cashiers), sometimes a bit lost with technology. Forgive them, they're earning a tough living. Try again with a different cashier next time. The money is still there. Or as my daughter would say, "Chill."
And speaking of "chill", for Cold Storage, use the Citibank Dividend Visa Card. It's a few percent worth of rebate.
I'm sure there are many more options like these.
Restaurants
Credit cards often have offers for restaurants. Many restaurants also offer their own membership cards. I mentioned before the pleasant surprise I had when I bought shares in Soup and Japan Foods. Both offer their store discount cards to shareholders. See (1) Soup Restaurant - Slurping with a Discount and (2) Japan Foods - Ajisen Discount. The discounts feel like a form of dividend aren't they? Slurp slurp.
Transportation
And finally, transportation. Need to travel right? Our legs can only take us so far.
If you commute by train, you might want to sign up with Travel Smart Rewards. It used to be called InSinc (see Insinc with the Times). Points are generated based on the time of travel on the MRT. These points are then spun in a snake-and-ladder game to generate prizes. Prizes are good and seems frequent enough. I've been receiving a few dollars a month. They have enabled a crediting arrangement so that the winnings can be credited into your bank account directly.
If you drive, then back to using your credit card. I get additional discounts when I use the Citibank Dividend Visa Card to pay for petrol at Shell stations, along with the Shell Card for points (redeemable rebates). I've a Shell station right round the corner, so that works really great for me. Again, there are various credit cards with similar arrangements with different petrol stations. Pick one that works for you.
Concluding Remarks
So there you have it, 4 ways to reduce spending. It's coming to lunch time. Time to go fetch my daughter and to run some errands. Let's see now, supermarket, lunch, petrol, and ...
Disclaimer: As far as buying the above shares go, study the companies carefully and make your own decision. The price may not be right. I'm not advocating a buy or sell. I bought Soup way back when it's price was far lower.
Credit Cards
Dr Wealth shared about 6 ways to reduce monthly expenses without compromising lifestyle. One idea was to use credit cards whenever we can so that we can score points and benefit from the card discounts. He also made an important point that this would go well only if one has the discipline to pay off in full each month, and not to allow ourselves to fall into the debt trap. It's really a silly idea to owe credit card debts. It's a downhill spiral that squeezes away our hard earned money paying interests. Worse, it's easily 24% per annum! I'm pretty disciplined.
I use a few Visa credit cards and found several to be good deals. The UOB One card and the Citibank Dividend card offer various cash rebates. Comes in the form of either a quarterly cash-back to offset the bills, or credits to offset the next payment at selected merchants. So I use the credit cards wherever possible for payments and have benefited substantively from these rebates. It all adds up. Worth a thought?
And, be stingy. Don't pay the annual card fees. The banks are going to hate me for this. Seek the waiver when the fee is due. Often, it's just a phone call away. Most banks have automated this process. I'm not even going to agree to pay half. They've always waived the fee, so long as there has been some spending. I'm 'ngiaow'.
Groceries
We need to buy groceries and numerous household items on a regular basis, unless you're the type of family that doesn't even cook at home. One of my brothers is like that. He has a fetish about keeping the whole house clean, all the time. We say he's "ko tak". His kitchen is really a museum, for display only.
I believe the wider community of modern working class is almost certainly going to buy a lot of stuff from the supermarkets. Their omni-presence and ubiquity is really a blessed convenience. Thank god for urbanisation! Whether it's NTUC, Cold Storage or any of the smaller chains, I guess we'll shop. When spoilt for choice, parking convenience, store crowded-ness, cleanliness, variety and freshness of food are perhaps other considerations by which we differentiate them.
And speaking of "chill", for Cold Storage, use the Citibank Dividend Visa Card. It's a few percent worth of rebate.
I'm sure there are many more options like these.
Restaurants
Credit cards often have offers for restaurants. Many restaurants also offer their own membership cards. I mentioned before the pleasant surprise I had when I bought shares in Soup and Japan Foods. Both offer their store discount cards to shareholders. See (1) Soup Restaurant - Slurping with a Discount and (2) Japan Foods - Ajisen Discount. The discounts feel like a form of dividend aren't they? Slurp slurp.
Transportation
And finally, transportation. Need to travel right? Our legs can only take us so far.
If you commute by train, you might want to sign up with Travel Smart Rewards. It used to be called InSinc (see Insinc with the Times). Points are generated based on the time of travel on the MRT. These points are then spun in a snake-and-ladder game to generate prizes. Prizes are good and seems frequent enough. I've been receiving a few dollars a month. They have enabled a crediting arrangement so that the winnings can be credited into your bank account directly.
If you drive, then back to using your credit card. I get additional discounts when I use the Citibank Dividend Visa Card to pay for petrol at Shell stations, along with the Shell Card for points (redeemable rebates). I've a Shell station right round the corner, so that works really great for me. Again, there are various credit cards with similar arrangements with different petrol stations. Pick one that works for you.
Concluding Remarks
So there you have it, 4 ways to reduce spending. It's coming to lunch time. Time to go fetch my daughter and to run some errands. Let's see now, supermarket, lunch, petrol, and ...
Disclaimer: As far as buying the above shares go, study the companies carefully and make your own decision. The price may not be right. I'm not advocating a buy or sell. I bought Soup way back when it's price was far lower.
11 August 2014
A Stock That's Worth a Closer Look - Handbags or Trash?
About two weeks ago, I posted the financial data of a particular stock and wondered if it was A Stock That's Worth a Closer Look?
The company is experiencing positive free cash flow, has negligible debts, and pays out a decent yield of 3.9% at a payout ratio of about 40%. Its PE ratio is in the region of 11x, distributions have stayed below earnings, and earnings continue to grow. All the above would be "green" by my book for a stock screening.
The only blips: (a) a price to book value of almost 4x; and more significantly (b) it has experienced a drop in price of more than 40% in the past year! The question is, why?
The company has pretty decent margins and likely has some brand attractiveness. The financials as mentioned above would suggest that it is well managed as well. So why the sharp drop, of a magnitude not unlike the Great Financial Crisis?
Is it a hoard behaviour? A gathering of Orcs welcoming Doomslayer? Does it then create an opportunity?
The stock concerned is none other than Coach, traded on the NYSE. It is facing intense competition from Michael Kors and Kate Spade. Has it gone out of fashion?
Supposedly it has diluted its branding due to its over dependency on discount store sales. Its sales in the US have dropped somewhat. But its Japan and China sales appear to be doing well.
When last I visited one of their US outlet stores a few years back, it was filled with tourists - of the Chinese kind. The store was crowded, and noisy. The check out queue, had a queue.
I see many ladies slinging one to work, though I wouldn't be able to tell if it's an "original" or a "chiong" ('copy original'?) item. My wife tells me however that Coach is passe. She's the one who knows the fashion of the day. Me, I just pay. If the ladies don't bite, they must really be in serious trouble.
So is this a McDonalds facing off the challenge of Chipotle and Yum? Or is this a Kodak facing the challenge of a digital age? Is this a Buy or a Sell? For now, my wife is holding onto her Coach bags, and I'm holding on to my Coach shares. Hers may be suffering from depreciation, mine may be suffering from deprecation. Time will once again tell.
Disclaimer: The usual reminder - do your own analysis and decide for yourself.
The company is experiencing positive free cash flow, has negligible debts, and pays out a decent yield of 3.9% at a payout ratio of about 40%. Its PE ratio is in the region of 11x, distributions have stayed below earnings, and earnings continue to grow. All the above would be "green" by my book for a stock screening.
The only blips: (a) a price to book value of almost 4x; and more significantly (b) it has experienced a drop in price of more than 40% in the past year! The question is, why?
The company has pretty decent margins and likely has some brand attractiveness. The financials as mentioned above would suggest that it is well managed as well. So why the sharp drop, of a magnitude not unlike the Great Financial Crisis?
Is it a hoard behaviour? A gathering of Orcs welcoming Doomslayer? Does it then create an opportunity?
The stock concerned is none other than Coach, traded on the NYSE. It is facing intense competition from Michael Kors and Kate Spade. Has it gone out of fashion?
Supposedly it has diluted its branding due to its over dependency on discount store sales. Its sales in the US have dropped somewhat. But its Japan and China sales appear to be doing well.When last I visited one of their US outlet stores a few years back, it was filled with tourists - of the Chinese kind. The store was crowded, and noisy. The check out queue, had a queue.
I see many ladies slinging one to work, though I wouldn't be able to tell if it's an "original" or a "chiong" ('copy original'?) item. My wife tells me however that Coach is passe. She's the one who knows the fashion of the day. Me, I just pay. If the ladies don't bite, they must really be in serious trouble.
So is this a McDonalds facing off the challenge of Chipotle and Yum? Or is this a Kodak facing the challenge of a digital age? Is this a Buy or a Sell? For now, my wife is holding onto her Coach bags, and I'm holding on to my Coach shares. Hers may be suffering from depreciation, mine may be suffering from deprecation. Time will once again tell.
Disclaimer: The usual reminder - do your own analysis and decide for yourself.
07 August 2014
Giving from the Heart - 80 Good Deeds
It was another one of those evening. Tired from another day of work, Alf reached home at the throes of sunset. Each evening, he would open the mailbox at the lift lobby. Always, looking forward to one day receiving a letter that says, "You've won a million dollars!"
There was never any reason to believe it would happen. He didn't have any known rich relative, nor done anything to expect such unexpected gratitude. But there was always "hope". Then again, "hope" was a 4-letter word. But one could always hope for some long lost but rich distant relative to appear one day. Never know.
On opening his mailbox, he was faced with the usual stack of letters. "Bah, tree killers." But it was certainly more acceptable than receiving numerous unsolicited phone calls in the past.
There was the usual sprinkling of letters promoting some new condo sales at all ends of the island, and property agents touting sales made at his condo with bold declarations of several units sold at a million bucks each. "Looks like a lot of millionaires from here" he thought.
Some of these leaflets used to include lovely magnets with nice photos of the agent and contact numbers. Some certainly looked more pleasing to his eyes than others. He had loads of those pasted on his refrigerator. So that was a lot of nice looking people on his refrigerator. Seems like there were less of these nowadays. Must be a cost cutting thing going on. Times must be getting hard for property agents.
And then, a letter seeking donation to a charity organisation.
"Dear, you think we should make a donation?"
Alf's wife glanced over and peeked at the letter, "Good to do good deeds."
Alf studied the letter further and made up his mind to do so. The letter also indicated that the organisation would automatically update IRAS for income tax purposes.
Curious, what's that about he wondered? Researching further on his Samsung S5, he discovered that for every dollar donated to recognised charities, he would receive 2.5 times the value in deductibles to his taxable income.
"Dear, did you know that if I donate $4,000, I would receive $10,000 deduction off my taxable income? At a tax bracket of 18% that I'm at now, that means I would avoid $1,800 of tax I otherwise have to pay.
"You mean you only need to spend $2,200 to donate $4,000?"
"Guess that's one way to look at it." He shrugged.
Alf's wife contemplated this new insight. "You know what? If you donate $50 to each charity, you can donate to 80 organisations?"
"That's a fascinating idea!" He was feeling excited already. 80 good deeds. Why not? Good karma too. He was getting really excited.
--
With apologies to much better written stories by other financial bloggers (esp. Bully the Bear) for the inspiration. 8)
Try this:
Secrets of Millionaire Dwarfs [Bully the Bear]
There was never any reason to believe it would happen. He didn't have any known rich relative, nor done anything to expect such unexpected gratitude. But there was always "hope". Then again, "hope" was a 4-letter word. But one could always hope for some long lost but rich distant relative to appear one day. Never know.
On opening his mailbox, he was faced with the usual stack of letters. "Bah, tree killers." But it was certainly more acceptable than receiving numerous unsolicited phone calls in the past.
There was the usual sprinkling of letters promoting some new condo sales at all ends of the island, and property agents touting sales made at his condo with bold declarations of several units sold at a million bucks each. "Looks like a lot of millionaires from here" he thought.
Some of these leaflets used to include lovely magnets with nice photos of the agent and contact numbers. Some certainly looked more pleasing to his eyes than others. He had loads of those pasted on his refrigerator. So that was a lot of nice looking people on his refrigerator. Seems like there were less of these nowadays. Must be a cost cutting thing going on. Times must be getting hard for property agents.
And then, a letter seeking donation to a charity organisation.
"Dear, you think we should make a donation?"
Alf's wife glanced over and peeked at the letter, "Good to do good deeds."
Alf studied the letter further and made up his mind to do so. The letter also indicated that the organisation would automatically update IRAS for income tax purposes.
Curious, what's that about he wondered? Researching further on his Samsung S5, he discovered that for every dollar donated to recognised charities, he would receive 2.5 times the value in deductibles to his taxable income.
"Dear, did you know that if I donate $4,000, I would receive $10,000 deduction off my taxable income? At a tax bracket of 18% that I'm at now, that means I would avoid $1,800 of tax I otherwise have to pay.
"You mean you only need to spend $2,200 to donate $4,000?"
"Guess that's one way to look at it." He shrugged.
Alf's wife contemplated this new insight. "You know what? If you donate $50 to each charity, you can donate to 80 organisations?"
"That's a fascinating idea!" He was feeling excited already. 80 good deeds. Why not? Good karma too. He was getting really excited.
--
With apologies to much better written stories by other financial bloggers (esp. Bully the Bear) for the inspiration. 8)
Try this:
Secrets of Millionaire Dwarfs [Bully the Bear]
04 August 2014
2 Great News from Changes to the SGX Stock Market
I couldn't be happier with the latest announcements on the changes for SGX. There are several changes upcoming but I would single out two in particular: (a) the minimum value of a share will be 20 cents, and (b) the minimum lot size would be reduced to 100 (it's typically 1,000 today).
A Penny for Your Thoughts
With share prices requiring a floor of 20 cents, it means that many penny stocks would have to ante up to consolidate the shares to get above the minimum sum.
It's a real bugbear when you're trying to buy 50,000 shares at 10 cents a piece and somebody decides to sell you just 1,000 shares! On my gawd, that's only $100 in total and the sales charge alone add another $30 to it. Geez. [Palm slap face]
Wonder what's the impact for Qian Hu? Hmmm .....
100 is a Good Number
Then there's the minimum lot size. Some shares are trading at over $10 per share. Buying 1,000 shares today would require an outlay of $10,000. Worse are those Jardine family of shares, with many trading at several tens of dollars per shares. Takes a family fortune to buy anything.
Granted, I could try my luck buying from the "Unit Share" board on POEMS. But liquidity is just too low. Trying to get anything transacted is like balloting for a new flat in the good old days. Wait long long. But of course, not as bad as waiting to strike Toto.
With the latest changes announced, I look forward to getting my hands on Jardine Matheson Holdings (JMH) and Dairy Farm at some point in the near future. 100 shares of JMH at US$60 would still be a pretty hefty sum. But at least, it would be more within reach.
Would the greater accessibility cause these stocks to suffer increased volatility? It could work both ways.
Santa Claus is Coming to Town
The later change is actually detrimental to the earlier. 100 shares at 20 cents is $20. We really need to get to a minimum of $1 per share to make any sense. Alternatively, can sales charges drop even lower?
Looks like two of my X'mas wishes are coming true (Wish List for X'mas 2014). Three more to go. Got to believe there's a Santa Claus living in the North Pole.
A Penny for Your Thoughts
With share prices requiring a floor of 20 cents, it means that many penny stocks would have to ante up to consolidate the shares to get above the minimum sum.
It's a real bugbear when you're trying to buy 50,000 shares at 10 cents a piece and somebody decides to sell you just 1,000 shares! On my gawd, that's only $100 in total and the sales charge alone add another $30 to it. Geez. [Palm slap face]
Wonder what's the impact for Qian Hu? Hmmm .....
100 is a Good Number
Then there's the minimum lot size. Some shares are trading at over $10 per share. Buying 1,000 shares today would require an outlay of $10,000. Worse are those Jardine family of shares, with many trading at several tens of dollars per shares. Takes a family fortune to buy anything.
Granted, I could try my luck buying from the "Unit Share" board on POEMS. But liquidity is just too low. Trying to get anything transacted is like balloting for a new flat in the good old days. Wait long long. But of course, not as bad as waiting to strike Toto.
With the latest changes announced, I look forward to getting my hands on Jardine Matheson Holdings (JMH) and Dairy Farm at some point in the near future. 100 shares of JMH at US$60 would still be a pretty hefty sum. But at least, it would be more within reach.
Would the greater accessibility cause these stocks to suffer increased volatility? It could work both ways.
Santa Claus is Coming to Town
The later change is actually detrimental to the earlier. 100 shares at 20 cents is $20. We really need to get to a minimum of $1 per share to make any sense. Alternatively, can sales charges drop even lower?
Looks like two of my X'mas wishes are coming true (Wish List for X'mas 2014). Three more to go. Got to believe there's a Santa Claus living in the North Pole.
31 July 2014
DBS Multiplier Account - Savings Interest Rate of up to 2.08%
Some time back, I came across a promotion from DBS on their DBS Multiplier Account. Depending on the amount of "monthly banking", the following would be the interest rate for the first $50,000 in the account:
[Source: DBS Bank website]
The "monthly banking" refers to transactions in an existing linked DBS/POSB account that include any (or all) of the following:
- salary deposited via GIRO from your employer
- DBS/POSB credit card bills
- DBS/POSB home loan
- investment dividends credited
Seems attractive. But it took me a while to figure out what the higher interest rate was applicable to.
I figured that since I had all 4 factors, I would be able benefit from the higher interest rates. Imagine, a $50,000 multiplier account linked to a savings account that had $15,000 worth of "monthly banking" transactions would attract 1.68% p.a. interest. That's $70 of interest each month! For some reason, the online calculator at the same DBS website indicates $69+ instead. Not sure why. In either case, it sure beats the miserable near zero interest rate of the standard savings account.
As advertised, there are no monthly account fee and no initial deposit required, but required a minimum age of 18 for the account holder. There is a $30 charge if the account is closed within 6 months. Looked ok, so I opened an account to begin with.
Unfortunately, what I didn't read was the fine print that if the amount was less than $10,000 a month, a charge would be levied! Seems I was docked $25 for that folly in that first month. Pretty silly, losing money to the bank instead of gaining from the interest. Sigh.
[Since 1 Jul 2014 though, DBS appears to have revised the minimum requirement to $3,000.]
I raised my savings deposited in that account subsequently and have earned $38.56 of interest over the next two months. So it works as advertised. BUT, do read the fine prints! Caveat emptor.
[Thought: Even CPF-OA returns a better rate at 2.5%. Of course, that comes with the lock-in till retirement if still short of the minimum sum.]
It is actually a multi-currency account but I have not used the foreign currency features. I suppose I could deposit the US$ cheques I sometimes receive from the US$ denominated ETFs into such an account.
If the savings are placed in foreign currencies, the interest rate tables are different. The Aussie$ being the most attractive. But then again, it comes with the forex fluctuation risks and the Aussie$ has fluctuated significantly of late.
Bottomline: If you do have a steady level of "monthly banking" with DBS/POSB and have the cash to spare, this may be worth your while.
| Total monthly banking with DBS or POSB | Interest Rate (p.a.) |
| < S$7,500 | 0.05% |
| S$7,500 to <S$10,000 | 0.98% |
| S$10,000 to <S$12,500 | 1.28% |
| S$12,500 to <S$15,000 | 1.48% |
| S$15,000 to <S$20,000 | 1.68% |
| S$20,000 and above | 2.08% |
The "monthly banking" refers to transactions in an existing linked DBS/POSB account that include any (or all) of the following:
- salary deposited via GIRO from your employer
- DBS/POSB credit card bills
- DBS/POSB home loan
- investment dividends credited
Seems attractive. But it took me a while to figure out what the higher interest rate was applicable to.
I figured that since I had all 4 factors, I would be able benefit from the higher interest rates. Imagine, a $50,000 multiplier account linked to a savings account that had $15,000 worth of "monthly banking" transactions would attract 1.68% p.a. interest. That's $70 of interest each month! For some reason, the online calculator at the same DBS website indicates $69+ instead. Not sure why. In either case, it sure beats the miserable near zero interest rate of the standard savings account.
As advertised, there are no monthly account fee and no initial deposit required, but required a minimum age of 18 for the account holder. There is a $30 charge if the account is closed within 6 months. Looked ok, so I opened an account to begin with.
Unfortunately, what I didn't read was the fine print that if the amount was less than $10,000 a month, a charge would be levied! Seems I was docked $25 for that folly in that first month. Pretty silly, losing money to the bank instead of gaining from the interest. Sigh.
[Since 1 Jul 2014 though, DBS appears to have revised the minimum requirement to $3,000.]
I raised my savings deposited in that account subsequently and have earned $38.56 of interest over the next two months. So it works as advertised. BUT, do read the fine prints! Caveat emptor.
[Thought: Even CPF-OA returns a better rate at 2.5%. Of course, that comes with the lock-in till retirement if still short of the minimum sum.]
It is actually a multi-currency account but I have not used the foreign currency features. I suppose I could deposit the US$ cheques I sometimes receive from the US$ denominated ETFs into such an account.
If the savings are placed in foreign currencies, the interest rate tables are different. The Aussie$ being the most attractive. But then again, it comes with the forex fluctuation risks and the Aussie$ has fluctuated significantly of late.
Bottomline: If you do have a steady level of "monthly banking" with DBS/POSB and have the cash to spare, this may be worth your while.
29 July 2014
A Stock That's Worth a Closer Look?
Look at the following set of financials:
Seems too good to be true? But it really is a real company on the stock exchange. Worth a second look? Guess which company this is?
For the answer, see the follow on post.
| Stock Data | |
|---|---|
| Market Capitalization (USD 'mil) | 9,494.59 |
| Common Shares Outstanding ('mil) | 274.1520 |
| 52 Week High (USD) (29/07/2013) | 58.710 |
| 52 Week Low (USD) (16/07/2014) | 33.390 |
| 52 Week Return (%) | -41.850 |
| Average Volume ('mil) | 4.4025 |
| Beta | 1.13 |
| Financial strength | |
|---|---|
| Current Ratio | 2.87 |
| Quick Ratio | 2.14 |
| Long Term Debt to Equity (%) | 0.02 |
| Total Debt to Equity (%) | 0.04 |
| Interest Coverage Ratio (TTM) | - |
| Free Cash Flow to Firm (TTM) (USD 'mln) | 521.13 |
| Margin | |
|---|---|
| Gross Margin (TTM) (%) | 71.09 |
| Operating Profit Margin (TTM) (%) | 27.35 |
| Net Profit Margin (TTM) (%) | 18.95 |
| Dividend § | |
|---|---|
| Annual Dividend per share (USD) | 0.9000 |
| Dividend Yield (TTM) (%) | 3.91 |
| Dividend Yield (Annual) (%) | 3.90 |
| Payout Ratio (TTM) (%) | 40.60 |
| 3-Year Growth Rate (%) | 33.89 |
| Valuation | |
|---|---|
| Historical P/E Ratio | 9.58 |
| P/E Ratio (TTM) | 10.55 |
| P/BV (latest interim) | 3.97 |
| BVPS (latest interim) (USD) | 8.7152 |
| EPS TTM (USD) | 3.2817 |
| ROA (%) | 25.91 | 29.21 | 34.53 | 36.20 | 31.17 |
| ROE (%) | 39.13 | 45.91 | 56.50 | 57.63 | 47.00 |
| DPS (USD) | 0.0750 | 0.3750 | 0.6750 | 0.9750 | 0.9000 |
| EPS (USD) | 1.9144 | 2.3269 | 2.9208 | 3.5322 | 3.6130 |
[Data dated 29 Jul 2014]
Would you invest in a company like this? Almost zero debt, strong margins, good dividend yield at a reasonable payout ratio of ~40%, strong ROA and ROE, fairly consistent dividend growth, consistent earnings growth, positive free cash flow.
Seems too good to be true? But it really is a real company on the stock exchange. Worth a second look? Guess which company this is?
For the answer, see the follow on post.
Is SPH a Leaky Tap?
"Drip, drip, drip" went my toilet spray (of the toilet bowl). Kinda make me wish for the Japanese type of toilet bowls. All that high - who needs a spray!? But alas, this is Singapore. So a spray it is.
The usual suspect as always was a worn out rubber washer. But it seems to be really hard to find one these days. It used to be easy to get one from those old musky and dark looking hardware stores. But these seem to have gone the way of the dodo bird. Old trade, hard to survive.
Looking at the stocks I own, I wonder if any fall into this category of old trade that is on their way out?
SPH
Newspapers are still being read, magazines are being bought, even if many are also being seduced by electronic media. Personally, I'm still a hardcopy guy and would rather read the printed sheets and magazines. Less damaging for my ageing eyes.
[Source: POEMS, dated 29 Jul 2014]
SPH should do well with a growing and educated population. Unfortunately, with the population growth tapering off and ageing, probably not going to see much growth there.
Advertisers? They will go where the readers are. The draw of Internet of Things is drawing them away. Too seductive to ignore. So it bodes well that SPH is diversifying itself into the Internet space, buying a string of companies in this realm.
At the same time, SPH has diversified by going into development of commercial properties, making use of its cash hoard. A shopping mall in the city and a couple more in the heartlands. Guess its aim is to secure a stream of regular income from these properties. It has always been seen as a steady dividend champion and this is possibly one way to preserve its dividend stream even as it makes the structural shift from pure print to a mix of print and electronic businesses.
Will it survive the transition and continue to be a strong dividend machine with positive long term growth potentials?
A leaky spray can still be fixed. All it needs is a new rubber. *blink blink*
The usual suspect as always was a worn out rubber washer. But it seems to be really hard to find one these days. It used to be easy to get one from those old musky and dark looking hardware stores. But these seem to have gone the way of the dodo bird. Old trade, hard to survive.
Looking at the stocks I own, I wonder if any fall into this category of old trade that is on their way out?
SPH
Newspapers are still being read, magazines are being bought, even if many are also being seduced by electronic media. Personally, I'm still a hardcopy guy and would rather read the printed sheets and magazines. Less damaging for my ageing eyes.
| Stock Data | |
|---|---|
| Market Capitalization (SGD 'mil) | 6,674.71 |
| Common Shares Outstanding ('mil) | 1,616.2461 |
| 52 Week High (SGD) (31/07/2013) | 4.327 |
| 52 Week Low (SGD) (29/08/2013) | 3.845 |
| 52 Week Return (%) | -1.390 |
| Average Volume ('mil) | 2.1671 |
| Beta | 0.57 |
| Financial strength | |
|---|---|
| Current Ratio | 4.82 |
| Quick Ratio | 4.75 |
| Long Term Debt to Equity (%) | 49.15 |
| Total Debt to Equity (%) | 49.23 |
| Interest Coverage Ratio (TTM) | 14.53 |
| Free Cash Flow to Firm (TTM) (SGD 'mln) | -277.09 |
| Margin | |
|---|---|
| Gross Margin (TTM) (%) | 53.58 |
| Operating Profit Margin (TTM) (%) | 34.28 |
| Net Profit Margin (TTM) (%) | 29.98 |
| Dividend § | |
|---|---|
| Annual Dividend per share (SGD) | 0.1500 |
| Dividend Yield (TTM) (%) | 3.60 |
| Dividend Yield (Annual) (%) | 3.60 |
| Payout Ratio (TTM) (%) | 156.61 |
| 3-Year Growth Rate (%) | -2.13 |
| Valuation | |
|---|---|
| Historical P/E Ratio | 15.70 |
| P/E Ratio (TTM) | 20.11 |
| P/BV (latest interim) | 1.92 |
| BVPS (latest interim) (SGD) | 2.1739 |
| EPS TTM (SGD) | 0.2073 |
| ROA (%) | 13.10 | 13.64 | 9.45 | 12.52 | 7.32 |
| ROE (%) | 20.36 | 23.26 | 17.43 | 19.44 | 11.94 |
| DPS (SGD) | 0.1600 | 0.1600 | 0.1600 | 0.1600 | 0.1500 |
| EPS (SGD) | 0.2616 | 0.3085 | 0.2402 | 0.3549 | 0.2656 |
SPH should do well with a growing and educated population. Unfortunately, with the population growth tapering off and ageing, probably not going to see much growth there.
Advertisers? They will go where the readers are. The draw of Internet of Things is drawing them away. Too seductive to ignore. So it bodes well that SPH is diversifying itself into the Internet space, buying a string of companies in this realm.
At the same time, SPH has diversified by going into development of commercial properties, making use of its cash hoard. A shopping mall in the city and a couple more in the heartlands. Guess its aim is to secure a stream of regular income from these properties. It has always been seen as a steady dividend champion and this is possibly one way to preserve its dividend stream even as it makes the structural shift from pure print to a mix of print and electronic businesses.
Will it survive the transition and continue to be a strong dividend machine with positive long term growth potentials?
A leaky spray can still be fixed. All it needs is a new rubber. *blink blink*
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